Investor Presentaiton
PANORAMA OF THE PRIVATE SECTOR'S PARTICIPATION IN SANITATION 2021
The three pillars of
the milestone
A NEW SOCIAL AND ECONOMIC FRONTIER FOR BRAZIL
With the approval of the new sanitation
session held on 24 June 2020, and the re-
sulting approval of the text of Law 14,026
by the Executive on 15 July of that same
year, the basic principles to be followed for
the country to move away from the bottom
of the world ranking were established.
milestone by the National Congress, at a
Law 14,026/2020 suggests a structured
path for the sector, anchored on three major
pillars: (a) better regulation; (b) more com-
petition; and (c) generation of improved
economies of scale in the provision of ser-
vices. These pillars seek the universaliza-
tion of sanitation services.
The best regulation will result from the per-
formance of the National Water and Sani-
tation Agency (ANA) by editing the sector's
reference standards while giving support to
subnational regulators. If well structured,
agile and effective, ANA will increase insti-
tutional stability, a key aspect for attraction
of investments and to protect users of san-
itation services.
The competition will promote
efficiency and greater market
openness to new operators,
enabling the necessary in-
vestments for universaliza-
tion and promoting greater
quality of services provided to
the population.
The incentive for competition is introduced
with the end of programme contracts - the
approval of the Executive's ban in the text
of Law 14,026/2020, on 17 March 2021,
confirmed that programme contracts for
the provision of public sanitation services
cannot be renewed, and irregular contracts
(expired or non-existent delegation, or in
disagreement with legal requirements) are
considered precarious. In such cases, the
provision of water supply and sewage ser-
vices will be subject to a bidding process
whenever the service is not provided direct-
ly by the holder.
Bidding processes and/or auctions of pub-
lic utility services such as sanitation can
take part in the following ways:
•
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By greatest grant (goodwill): the
company holding the qualification
requirements as set out in the Call
for Tender that offers the highest
bid in relation to the minimum grant
amount is considered the winner of
the auction.
By the lowest tariff (negative
goodwill): the auction is won by the
company that has the qualification
requirements as set out in the
Invitation to Bid, that presents the
lowest price to be charged to the
users.
Or by a hybrid model that combines
the two factors.
The generation of economies
of scale in provision of ser-
vices is necessary so that
those municipalities less at-
tractive from the technical
and economic points of view
may benefit from the expan-
sion of water and sewage
services, as now expected
with the new milestone.
The provision of services, as regionalised
through grouping of municipalities, is set
forth in Law 14,026/2020 and opens the
way so that the sector may, in an organized
and effective way, enjoy the benefits of
gain in scale, making it feasible to practice
cross-subsidy. Thus, it is possible to guar-
antee sanitation services, also in those lo-
cations with poorer economic potential, or
those with geographical conditions or avail-
ability of water that are unfavorable for the
profitability of the service (please read item
1.2, on regionalization, as below).
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